McDonald's: Regulator says it's a 'joint employer'

New York • McDonald's Corp. says it has been notified by a labor regulator that it can be named a "joint employer" for workers in its franchisee-owned restaurants.

The decision by the National Labor Relations Board was being closely watched because it could potentially expose McDonald's to liability for the working conditions in its franchisees' stores.

In the U.S., the vast majority of McDonald's more than 14,000 restaurants are owned and operated by franchisees. The same is true for many other fast-food companies, including Burger King Worldwide Inc. and Yum Brands, which owns KFC, Taco Bell and Pizza Hut. The companies make money by collecting royalty and sales fees from franchisees.

Labor organizers have said McDonald's should be held accountable as a joint employer because the company has so much control in setting operational terms even at its franchised locations. The matter has come under the spotlight as fast-food groups backed by the Service Employees International Union have protested in cities around the country since late 2012, in a push for higher wages and the right to unionize.

Representatives for the National Labor Relations Board and the fast-food workers group weren't immediately available for comment.

Heather Smedstad, senior vice president of human resources for McDonald's USA, says the company was notified by the board's regional office in New York on Tuesday. She said McDonald's plans to contest the decision and that it doesn't direct the hiring, termination, wages or hours for workers at franchised locations.

She said McDonald's has never been determined to be a joint employer in the past.

"This is such a radical departure that it should be a concern to business men and women across the country," Smedstad said.

The International Franchise Association, which represents franchisees, has opposed the identification of McDonald's as a joint employer. The group also filed a lawsuit in Seattle challenging whether fast-food and other franchisees should be treated like large employers, thus subjecting them to a new $15 minimum wage at an earlier date than smaller businesses.

"If franchisors are joint employers with their franchisees, these thousands of small business owners would lose control of the operations and equity they worked so hard to build," the International Franchise Association said in a statement.